O'Reilly Auto Parts 2014 Annual Report Download - page 38

FORM 10-K
31
earnings before interest, taxes, depreciation, amortization, rent and non-cash share-based compensation expense ("EBITDAR"). Adjusted
debt includes outstanding debt, outstanding stand-by letters of credit and similar instruments, six-times rent expense and excludes any
premium or discount recorded in conjunction with the issuance of long-term debt. In the event that we should default on any covenant
contained within the Credit Agreement, certain actions may be taken, including, but not limited to, possible termination of commitments,
immediate payment of outstanding principal amounts plus accrued interest and other amounts payable under the Credit Agreement and
litigation from our lenders. We had a consolidated fixed charge coverage ratio of 5.36 times and 4.98 times as of December 31, 2014
and 2013, respectively, and a consolidated leverage ratio of 1.72 times and 1.90 times as of December 31, 2014 and 2013, respectively,
remaining in compliance with all covenants related to the borrowing arrangements. Under our current financing plan, we have targeted
an adjusted debt to EBITDAR ratio range of 2.00 times to 2.25 times.
The table below outlines the calculations of the consolidated fixed charge coverage ratio and consolidated leverage ratio covenants, as
defined in the Credit Agreement governing the Revolving Credit Facility, for the years ended December 31, 2014 and 2013 (dollars in
thousands):
For the Year Ended
December 31,
2014 2013
GAAP net income $ 778,182 $ 670,292
Add: Interest expense 53,290 49,074
Rent expense 263,028 254,892
Provision for income taxes 444,000 388,650
Depreciation expense 193,418 183,220
Amortization expense (benefit) 787 (40)
Non-cash share-based compensation 23,095 21,722
Non-GAAP EBITDAR $ 1,755,800 $ 1,567,810
Interest expense $ 53,290 $ 49,074
Capitalized interest 11,480 10,644
Rent expense 263,028 254,892
Total fixed charges $ 327,798 $ 314,610
Consolidated fixed charge coverage ratio 5.36 4.98
GAAP debt $ 1,396,640 $ 1,396,208
Stand-by letters of credit 47,861 51,715
Discount on senior notes 3,385 3,890
Six-times rent expense 1,578,168 1,529,352
Non-GAAP adjusted debt $ 3,026,054 $ 2,981,165
Consolidated leverage ratio 1.72 1.90
Free cash flow, the consolidated fixed charge coverage ratio and consolidated leverage ratio discussed and presented in the tables above
are not derived in accordance with United States generally accepted accounting principles ("GAAP"). We do not, nor do we suggest
investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. We
believe that the presentation of our free cash flow, consolidated fixed charge coverage ratio and consolidated leverage ratio provides
meaningful supplemental information to both management and investors and reflects the required covenants under our credit agreement.
We include these items in judging our performance and believe this non-GAAP information is useful to investors as well. Material
limitations of these non-GAAP measures are that such measures do not reflect actual GAAP amounts. We compensate for such limitations
by presenting, in the tables above, a reconciliation to the most directly comparable GAAP measures.
Share repurchase program:
Under our share repurchase program, as approved by our Board of Directors, we may, from time to time, repurchase shares of our common
stock, solely through open market purchases effected through a broker dealer at prevailing market prices, based on a variety of factors
such as price, corporate trading policy requirements and overall market conditions. We may increase or otherwise modify, renew, suspend
or terminate the share repurchase program at any time, without prior notice. As announced on February 5, 2014, August 13, 2014, and